Jaeson Schmidt

Jaeson Schmidt asked about the next steps for the Lighthouse trials, their potential impact on the P&L, and the demand pull and customer base for the recently acquired Nextivity product line.

Answer

President and CEO Jacob Suen explained that U.S. Lighthouse trials were successful, leading to engagement on business plans and network interoperability, while international trials resulted in follow-up executive meetings at MWC. CFO Michael Elbaz clarified that Lighthouse trial revenues are not expected in FY2026 but from system integrators in the second half of 2026, with meaningful contributions from Middle Eastern partners. Regarding Nextivity, Michael Elbaz stated it was a small, strategic, non-cash acquisition of IP and customer base, supporting current FirstNet customers and aiming to expand the revenue run rate from approximately $2 million in the prior year, with potential international growth through a reseller agreement. Jacob Suen added that the HPUE acquisition enhances the AirgainConnect platform, particularly for the first responder market.

Jaeson Schmidt inquired about the next steps for the recently completed Lighthouse trials, their expected impact on the P&L, and the potential demand and existing customer base for the newly acquired Nextivity HPUE product line.

Answer

CEO Jacob Suen and CFO Michael Elbaz explained that the U.S. Lighthouse trial is moving to business plan creation and network interoperability, with the international trial progressing to executive meetings at MWC, but no FY2026 revenue is expected from these specific trials. Michael Elbaz clarified that FY2026 Lighthouse revenue is anticipated from system integrators in the U.S. and Middle East. Regarding the Nextivity acquisition, Michael Elbaz detailed it as a non-cash, non-equity deal acquiring IP and customer base, supporting current FirstNet customers, with a reseller agreement for international expansion. He noted the product line had a $2 million revenue run rate last year and is expected to be Adjusted EBITDA positive on day one, with Jacob Suen highlighting its strategic fit with the AC Fleet and FirstNet market.

Jaeson Schmidt inquired about the sales cycle length for the new 8-figure contract and other Gen-3 contracts, as well as whether the pricing for Gen-3 capacity aligns with prior expectations.

Answer

Brian O'Toole (CEO, BlackSky) stated that the 8-figure contract's sales cycle was at the faster end of the typical 12-18 month range for Gen-3 deals. He confirmed that Gen-3 capacity pricing is in line with expectations and business models, reflecting the improved 35-centimeter capability. Brian highlighted that Gen-3 satellites offer performance comparable to much larger, more expensive systems, providing compelling economics and strong margins.

Jaeson Schmidt inquired about the sales cycle length for the new eight-figure contract and other Gen-3 contracts, as well as whether Gen-3 capacity pricing aligns with prior expectations.

Answer

Brian O'Toole, CEO of BlackSky, indicated that typical sales cycles for these types of contracts are 12 to 18 months, with the recent eight-figure deal being on the faster end. He confirmed that Gen-3 capacity pricing is exactly in line with expectations, reflecting the improved 35-centimeter capability and offering compelling economics and strong margin performance compared to larger, more expensive satellite systems.

Jaeson Schmidt of Lake Street Capital Markets inquired about what portion of the company's backlog is related to Gen 3 capacity and asked about the key factors determining the high and low ends of the updated full-year guidance.

Answer

CEO Brian O’Toole confirmed that a 'significant portion' of the backlog is tied to Gen 3 imagery, analytics, and related satellite solutions from large, previously announced contracts. He explained that the guidance range accounts for both the uncertainty in U.S. government contract timing and the inherent difficulty in precisely forecasting the closing of large deals, which is typical for the second half of the year.

Jaeson Schmidt inquired about the expected timeline to recognize the current backlog, how much of it relates to Gen-3 capacity, and the outlook for professional services revenue in Q2.

Answer

CEO Brian O'Toole stated that a significant portion of the backlog will convert to revenue in the coming months, particularly in the second half of the year, with a strong backlog extending beyond 2026. CFO Henry Dubois confirmed that professional services revenue is expected to decrease in Q2 following a large milestone-based recognition in Q1.

Jaeson Schmidt asked if Gen-3 contracts are commanding a price or size lift as anticipated and whether customer demand is shifting primarily to Gen-3. He also inquired if professional services revenue is expected to grow in 2025.

Answer

CEO Brian O'Toole confirmed that the market is responding positively to Gen-3's advanced capabilities, leading to long-term agreements in line with expectations. He noted that while customers are excited for Gen-3, the high-frequency monitoring of Gen-2 remains highly valued and continues to be purchased. CFO Henry Dubois added that while professional services should see some growth in 2025, imagery and analytics revenue is expected to grow at a faster rate long-term.

Jaeson Schmidt inquired about the quantification of revenue that shifted from Q3 to Q4, the portion of Q3 bookings related to Gen-3 capacity, and the current bookings activity in Q4.

Answer

CEO Brian O'Toole explained that while some revenue shifted due to the natural lumpiness of milestone-driven contracts, the company expects a strong Q4 and remains on track for full-year guidance. He clarified that Q3 bookings were not specifically for Gen-3 but were driven by current software and AI analytics capabilities that will transition to the Gen-3 platform, citing the Luno award as a key example.

Jason Schmidt from Lake Street Capital Markets asked about the programs Amorphous Materials was involved in and how LightPath plans to scale its $3 million run rate post-acquisition. He also inquired about the gross margin outlook for the March quarter, given the strong December performance, and whether the company was impacted by the government shutdown.

Answer

CEO Sam Rubin stated that Amorphous Materials primarily served one large defense prime on two major airborne platforms, and LightPath plans to scale its revenue by integrating its value-added capabilities like fabrication, molding, coating, and assembly with Amorphous's materials. CFO Al Miranda indicated that while the December quarter benefited from a high-margin engineering contract, the company's year-to-date gross margin is 33%, with a goal of 35%, suggesting a stable outlook. Sam Rubin confirmed that LightPath was not significantly impacted by the government shutdown.

Jason Schmidt asked for details on the programs Amorphous Materials was involved in prior to acquisition and how LightPath plans to scale its $3 million run rate. He also questioned the outlook for gross margin in the upcoming March quarter and whether the company was impacted by the government shutdown.

Answer

CEO Sam Rubin stated that Amorphous Materials primarily served one large defense prime on two major airborne platforms, accounting for about 80% of its revenue. He explained that LightPath plans to scale by adding value-added services like fabrication, molding, coating, and assemblies to Amorphous's materials. CFO Al Miranda indicated that while the engineering contract in the current quarter was unusually high-margin, the company's year-to-date gross margin is 33%, with a goal of 35% for the upcoming quarter. CEO Sam Rubin confirmed that the company was not significantly impacted by the government shutdown.

Jaeson Schmidt inquired about G5 Infrared's revenue contribution in the June quarter and its proportion within the $90 million backlog. He also asked about the company's expectations for sole-source status on the border security opportunity.

Answer

CFO Al Miranda reported G5 contributed $4.2 million to revenue in the June quarter. CEO Sam Rubin noted that approximately two-thirds of the backlog consists of cameras and assemblies, but did not provide a specific G5 breakdown. Regarding border security, CEO Sam Rubin expressed confidence, stating he wouldn't be surprised if LightPath supplied all towers along the border.

Jaeson Schmidt inquired about G5 Infrared's revenue contribution in the June quarter, its portion of the $90 million backlog, and the potential for LightPath Technologies to be the sole supplier for the border security opportunity.

Answer

CFO Al Miranda stated that G5 Infrared contributed $4.2 million to revenue in the June quarter. CEO Sam Rubin noted that approximately two-thirds of the total backlog comprises cameras and assemblies, without a specific G5 breakdown. Regarding border security, Sam Rubin expressed confidence in LightPath's unique position, suggesting they might supply all towers.

Jaeson Schmidt inquired about G5 Infrared's revenue contribution to the June quarter and its proportion within the $90 million backlog, also asking if LightPath expects to be the sole source for the border security opportunity.

Answer

CFO Albert Miranda stated G5 contributed $4.2 million to revenue in the quarter and that cameras and assemblies comprise about two-thirds of the backlog. CEO Sam Rubin indicated that LightPath is in a unique position and would not be surprised to provide all towers for the border.

Asked for the March-end backlog number, clarification on the combined revenue guidance, and the forward-looking OpEx run rate.

Answer

The March backlog was $27.4M. The difference in revenue guidance ($51M vs a prior $55M+) is due to different timeframes being discussed (12 months post-acquisition vs. fiscal/calendar year). The normalized quarterly OpEx is expected to be around $5M, excluding extraordinary M&A costs and amortization.

Jaeson Schmidt asked for the backlog figure as of the end of March, sought clarification on the combined revenue guidance of $51 million, and inquired about the expected operating expense run rate for the combined company going forward.

Answer

CFO Albert Miranda reported the backlog at $27.4 million. He clarified that the $51 million revenue forecast is for the 12-month period following the G5 acquisition (February to February), explaining the apparent discrepancy with other figures that may reference different time frames. Miranda also projected that the combined quarterly operating expense would be approximately $5 million, excluding extraordinary M&A costs and amortization.

Jaeson Schmidt inquired about the resolution of recent manufacturing yield issues, the extent of customer overlap and cross-selling opportunities with the newly acquired G5 Infrared, and the gross margin profile of the G5 business.

Answer

CFO Albert Miranda clarified that the yield issues were minor but were exacerbated by Chinese supply chain delays that hindered their ability to source replacement materials quickly. CEO Sam Rubin highlighted significant cross-selling potential, noting that many systems use both LightPath's uncooled and G5's cooled cameras, and confirmed these synergies are not yet factored into G5's earn-out projections. Albert Miranda added that G5's higher-margin camera business is expected to lift the combined company's gross margin.

Jaeson Schmidt inquired if the new Mantis camera's features were driven by specific customer demand, asked about the expected future level of SG&A expenses, and questioned the updated timeline for the automotive market opportunity.

Answer

CEO Sam Rubin confirmed the new Mantis camera was developed from detailed customer conversations and the expertise of new team members. CFO Albert Miranda explained that while structural costs were reduced, the savings would be reinvested into business development initiatives. Sam Rubin also clarified the automotive timeline, noting volumes will be smaller in the next two years as the industry works on a behind-the-windshield solution, with significant volume ramping in fiscal 2027.

Inquired if the new Mantis camera features were driven by specific customer demand, sought clarity on the future level of SG&A expenses after cost-cutting, and asked for an update on the timeline for the automotive opportunity.

Answer

The new Mantis camera version was developed based on detailed customer conversations and expertise from new team members. The $1.2 million in cost savings will be reinvested into business development initiatives. The automotive opportunity timeline has shifted further out, with significant volumes not expected until a behind-the-windshield solution is adopted around 2028.

Jaeson Schmidt asked which new business initiatives, beyond humanoid robots, are exceeding original expectations and inquired whether the additional hiring in the Sensor segment is for infrastructure build-out or driven by specific vertical demand.

Answer

CEO and President Ziv Shoshani identified ultra-high temperature ceramics, precision resistors in semiconductors, and Physical AI applications like autonomous logistics as outperforming initiatives. He clarified that Sensor segment hiring is primarily driven by strong demand pull from end markets such as test and measurement, avionics, military, space, and general industrial applications, indicating a sustained recovery.

Jaeson Schmidt asked about which verticals within VPG's new business initiatives, beyond humanoid robots, are outperforming expectations. He also questioned whether the additional hiring in the Sensors segment is primarily for infrastructure build-out or driven by demand pull from specific end markets.

Answer

CEO and President Ziv Shoshani identified ultra-high temperature ceramics, precision resistors in semiconductors, and Physical AI applications like autonomous logistics as outperforming new business initiatives. He clarified that Sensors segment hiring is driven by stronger order intake and expected sustained recovery in end markets such as test and measurement, avionics, military, space, and general industrial applications.

Jaeson Schmidt of Lake Street inquired about the quantifiable impact of the government shutdown on Lantronix's performance during the December quarter. He also asked about any current supply constraints, specifically addressing the well-known memory shortage. Furthermore, he sought management's perspective on how the gross margin profile might evolve in the near to medium term, considering the accelerating drone revenue and the increasing mix of software in the business.

Answer

CEO Saleel Awsare noted that the government shutdown primarily affected IoT system box products, but the team's execution mitigated the overall impact, and he expects normalization. Regarding memory shortages, he acknowledged pricing and supply pressures but stated proactive measures with customers ensure sufficient supply, particularly for new drone businesses, without significant short-to-midterm issues. CFO Brent Stringham explained that drone margins are currently near the corporate average, with expectations for a slight increase longer term as software and services grow, but no meaningful near-term increase is forecasted. CEO Saleel Awsare added that the upward trajectory in gross margins year-over-year and sequentially indicates a strengthening business moat.

Jaeson Schmidt inquired about quantifying the impact of the government shutdown in the December quarter and whether Lantronix is experiencing any supply constraints, particularly regarding memory shortages. He also asked about the near-term and medium-term gross margin profile given the drone momentum and growing software contribution.

Answer

CEO Saleel Awsare noted that the government shutdown caused slower IoT system product sales, but the team's execution mitigated the overall impact, and normalization is expected. He acknowledged pricing and supply pressures in memory but stated proactive measures are in place, and no significant short-to-long-term issues are foreseen. CFO Brent Stringham indicated that drone margins are currently near the corporate average, with a slight increase expected longer-term as software and services grow, but no meaningful near-term increase. Awsare added that the gross margin trajectory is upward, reflecting a strengthening business moat.

Jaeson Schmidt of Lake Street Capital Markets inquired about the near-term potential of Lantronix's drone market opportunity, including traction with Redcat and the broader pipeline, and asked for color on the dynamics driving the stronger-than-usual sequential growth guidance for the September quarter.

Answer

President & CEO Saleel Awsare expressed strong optimism for the drone market, noting Lantronix is engaged with over 10 drone manufacturers for military and industrial applications. He highlighted the company's camera expertise and North American, TAA/NDAA-compliant manufacturing as key differentiators. Awsare confirmed initial shipments for the Redcat win began in the June quarter, providing visibility into fiscal 2026. Regarding the Q1 guidance, he explained that the expected growth is driven by broad-based momentum across the core business, including Edge IoT and out-of-band networking solutions.

Jaeson Schmidt inquired about the NetComm business, asking for its revenue contribution in the March quarter and its future growth prospects. He also asked about current order patterns and quoting activity in Q4 given the macroeconomic environment, and whether the macro outlook has impacted the company's view on the Gridspertise relationship for fiscal 2026.

Answer

President and CEO Saleel Awsare stated that the acquired NetComm business is tracking to exceed its annualized revenue target of $6-7 million by 15-20%, noting strong engagement with key customers and new cross-selling opportunities. Regarding the macro environment, Awsare confirmed no order cancellations or pushouts and highlighted the company's plan to exit China manufacturing by early Q1 2026. CFO Brent Stringham added that less than 5% of China-made products are currently destined for the U.S. On the Gridspertise topic, Awsare reiterated that they remain a single-source supplier and are closely engaged as Gridspertise continues its deployment.

Jaeson Schmidt inquired about the status of Lantronix's large smart grid customer, asking if the outlook for follow-on orders in the calendar year had changed and requesting an update on the North American opportunity. He also asked about the gross margin forecast for the remainder of fiscal 2025.

Answer

CEO Saleel Awsare confirmed that the long-term outlook for the smart grid customer, Gridspertise, has not changed and that they remain sole-sourced. He noted the current slowdown is related to the customer's deployment rollout and mentioned two active pilots in North America. CFO Brent Stringham added that non-GAAP gross margin is expected to be slightly higher in Q3 compared to Q2, driven by product mix.

Jaeson Schmidt from Lake Street Capital Markets asked about the potential revenue timing for the new North American smart grid opportunity and sought clarification on whether the Q1 gross margin guidance includes any further excess inventory charges.

Answer

CEO Saleel Awsare explained that the North American smart grid project is in the early proof-of-concept stage and a significant revenue ramp is likely 18 to 24 months away. CFO Jeremy Whitaker confirmed that the Q1 2025 gross margin guidance of low-to-mid 40s does not anticipate any meaningful inventory charges and is expected to benefit from an improved product mix.

Jaeson Schmidt asked about Kopin's expanding pipeline and how to quantify near-term (1-2 year) opportunities and backlog, especially given the nature of IDIQ contracts, and requested an update on the Kopin One initiatives and automation implementation.

Answer

CEO Michael Murray stated that Kopin has approximately 80% of the backlog needed for its 2026 plan, with strong visibility on three major programs (thermal weapon sights, aviation helmet, medical) extending to 2027-2030. He confirmed Kopin One is fully integrated, the FabLite strategy is nearly complete by year-end, and the first wave of automation is operational, with a second phase in December to increase throughput and generate OpEx savings without significant headcount changes.

Jaeson Schmidt from Lake Street asked about the momentum in Kopin's expanding pipeline, seeking insight into the 1-2 year outlook for backlog and near-term opportunities, and requested an update on the Kopin One initiatives and automation implementation timeline.

Answer

CEO Michael Murray stated Kopin has approximately 80% of the backlog needed for its 2026 plan, with strong visibility on three major programs (thermal weapon sights, aviation helmets, medical) extending to 2027-2030. He also confirmed Kopin One is fully integrated, the FabLite strategy is nearing completion by year-end, and the first phase of automation is operational, with the second phase expected in December to boost throughput and efficiency.

Jaeson Schmidt of Lake Street Capital Markets inquired about the long-term revenue potential of the strategic investment from Theon International, whether Theon would receive capacity priority, and the book-to-bill ratio for the second quarter.

Answer

CEO Michael Murray detailed a multi-faceted opportunity with Theon, including supplying internal microdisplay needs, co-developing application-specific solutions like DayVAS and DarkWave for the European market, and pursuing joint R&D. Murray confirmed Theon would help increase utilization at the Dalgety Bay facility. He also stated that Q2 had a positive book-to-bill, and the majority of delayed orders were subsequently received, with significant R&D orders still expected in 2025.

Jaeson Schmidt of Lake Street asked about current quoting activity and order patterns in Q2 given the macroeconomic dynamics. He also inquired about the momentum behind recent R&D awards and how they are expected to translate into future production contracts.

Answer

CEO Michael Murray stated that after a slow start to the year, order flow freed up in Q2, and the company is tracking several large government orders in the $10-$20 million range, expecting a stronger second half. He explained that R&D awards, while modest in initial dollar value (e.g., $1M-$2.5M), are strategically vital as they unlock significant future opportunities, such as the 'off-the-visor' technology and next-generation color microLEDs for soldier systems.

Jaeson Schmidt from Lake Street Capital Markets asked about the impact of government budget changes on customer engagement, order activity in Q1 2025, and the completion timeline for the company's factory automation initiatives.

Answer

CEO Michael Murray confirmed no negative impact from government budget changes, instead noting an influx of requests for training, simulation, and drone systems. He reported significant and steady order activity in Q1 2025, with more announcements pending. Regarding automation, Murray described an aggressive, phased rollout starting this quarter, aimed at increasing manufacturing throughput to support higher volumes without adding significant headcount.

Jaeson Schmidt inquired about Kopin's traction in international markets, the current state of its international sales infrastructure, the book-to-bill ratio for Q3, and the potential business impact of the new U.S. administration.

Answer

CEO Michael Murray explained that international business is a significant growth opportunity, expected to expand due to geopolitical factors and increased NATO spending, though the sales infrastructure is not yet fully built out. He stated that the Q3 book-to-bill was slightly below 1:1, but remains positive and ahead of schedule for the full year. Murray also conveyed optimism that the new administration would be a long-term positive for Kopin, citing its focus on NATO spending, U.S. defense budgets, and support for small-cap companies.

Jaeson Schmidt from Lake Street Capital Markets asked about other pockets of strength within the Medical segment beyond the major customer ramp-up and inquired about the company's long-term growth prioritization between acquiring new customers versus expanding programs with existing ones.

Answer

CEO Richard Phillips confirmed that there is incremental growth in Medical beyond the largest customer, stating that most new customer introductions over the last two years have been in that segment. Regarding long-term growth, he described the strategy as "all of the above," including recovery in demand from won programs, aggressively pursuing new business, and expanding relationships with current customers, with the biggest new customer wins expected in the medical space.

Jaeson Schmidt asked if any customer orders were pulled forward into the March quarter due to the tariff environment. He also inquired about quoting and booking activity trends in the first month of Q4 and sought clarification on the expected trend for operating expenses, specifically SG&A, for the remainder of the calendar year.

Answer

CEO Richard Phillips stated that while the company is aware of the possibility of order pull-forwards ahead of tariffs, they have not received strong indications from customers that this is happening on a large scale. He described the current quoting funnel as "very healthy" with pockets of strength. CFO Jana Croom addressed OpEx, cautioning that the current low SG&A level of 3% of sales is not sustainable in FY '26 as the company will need to make investments to support its return to growth.

Jaeson Schmidt from Lake Street Capital Markets asked whether the revised fiscal 2025 guidance was driven by broad-based softness or a specific vertical. He also inquired if bookings activity in the December quarter met expectations and if the current SG&A expense level represents a new sustainable run rate.

Answer

Chief Financial Officer Jana Croom responded that the softness is broad-based, though the automotive vertical is holding up relatively well. Chief Executive Officer Ric Phillips confirmed that bookings over the last six months were in line with internal expectations. Jana Croom clarified that the current low SG&A expense is not sustainable long-term and the company's goal remains 3.5% of net sales, acknowledging the need to balance discretionary cuts with inflationary pressures.

Jaeson Schmidt from Lake Street Capital Markets asked for visibility on when the elevated inventory in the automotive sector might normalize, the expected gross margin trajectory for fiscal 2025, and whether the first quarter represented the revenue low point for the year.

Answer

Chief Executive Officer Ric Phillips responded that there is no clear line of sight for when the auto inventory glut will clear, but the company monitors it closely. Chief Financial Officer Jana Croom added that the Q1 gross margin of 6.3% was disappointing and expects a measured improvement in Q2 followed by more significant improvement in the second half of the fiscal year. She also indicated that with Q2's revenue decline expected to be in line with Q1's, the second quarter would likely be the revenue low point.

Jaeson Schmidt of Lake Street Capital Markets inquired about the potential scale and financial impact timeline of the new ISCO grocery logistics partnership. He also asked about current quarter order patterns and the outlook for gross margins in the second half of the year following the Q2 results.

Answer

CEO Kirsten Neukwist explained that the ISCO partnership aims to tag over 400 million containers in 4-5 years, with mass production targeted for 2026, representing a significant volume opportunity. She confirmed that Q3 order patterns are tracking in line with guidance. Both Neukwist and CFO Ed Kernbauer stated that gross margins, which were negatively impacted by dual manufacturing costs in H1, are expected to see a positive impact in Q3 and Q4 following the completion of the Singapore production shutdown.

Jaeson Schmidt of Lake Street Capital Markets questioned whether Identiv's Q1 2025 results benefited from any customer order pull-ins due to macroeconomic dynamics. He also asked for commentary on quoting activity and booking trends observed so far in Q2.

Answer

Executive Kirsten Newquist stated that Q1 did not benefit from any significant customer order pull-ins. Regarding Q2, she noted that while there is some customer caution and a few small orders on hold, the company has not seen significant concerns, and the current guidance reflects any anticipated slowdown as everyone awaits clarity on tariffs.

Jaeson Schmidt asked for the size of the customer order that was pulled into Q4 2024 from Q1 2025. He also inquired about the expected cadence of gross margin improvement throughout 2025 and whether management anticipates full-year revenue growth in 2025.

Answer

Executive Justin Scarpulla indicated the Q4 customer pull-in was largely responsible for the $600,000 revenue beat versus guidance and could be triangulated from the Q1 outlook. Regarding gross margin cadence, he stated that current consensus estimates are directionally in the ballpark. Executive Kirsten Newquist noted that while they are excited about new projects, significant growth from them is expected more in 2026 than 2025, as 2025 will be a development year.

Jaeson Schmidt from Lake Street Capital Markets asked for the expected timeline for the data center opportunity to materially impact the P&L and for guidance on operating expense trends for the rest of the calendar year.

Answer

CEO Cheri Beranek projected that the data center opportunity would begin contributing slightly to revenue in fiscal 2026, with a more significant impact expected in fiscal 2027. She clarified Clearfield's strategy is to connect data centers for its community broadband customers, not compete in the hyperscaler space. CFO Dan Herzog stated that OpEx is expected to trend slightly higher in Q4 due to trade shows, travel, and year-end professional service fees.

Jaeson Schmidt of Lake Street Capital Markets asked about the status of customer channel inventory destocking. He also inquired about sequential growth with the largest robotics customer in Q2 and the expected gross margin trajectory for Q4 following anticipated Q3 pressures.

Answer

Chairman & CEO R. Jeffrey Bailly confirmed that the inventory destocking issue appears to be resolved, with robust growth across several markets and low channel inventory at AJR. He noted that after a slight decline in Q1, the largest robotics customer saw a significant increase in Q2, balancing out to meet annual expectations. SVP, Treasurer & CFO Ronald Lataille added that while Q3 margins will be pressured by labor issues, he expects a rebound in Q4, stating that tariffs are not expected to have a material impact on margins.

Jaeson Schmidt of Lake Street Capital Markets asked about customer channel inventory levels, the sequential growth trajectory of the largest robotics customer, and the gross margin outlook for the second half of the year.

Answer

CEO R. Jeffrey Bailly indicated that the customer inventory destocking issue appears to be resolved, with channel inventory for AJR products now running low. He clarified that the largest robotics customer saw a slight decline in Q1 followed by a strong increase in Q2, aligning with annual expectations. CFO Ronald Lataille projected that gross margins would face pressure in Q3 due to labor issues but should rebound in Q4, with tariffs not expected to have a material impact.

Jaeson Schmidt from Lake Street Capital Markets asked for clarification on the 2025 growth outlook for the robotic surgery business, inquired about market share dynamics at UFP's largest customer, and questioned if there were any pockets of excess inventory.

Answer

CEO Jeff Bailly clarified that modest, low single-digit growth is expected for both the largest customer and the robotic surgery segment as a whole in 2025. He stated UFP holds about two-thirds of the business with its largest customer and views the customer's own capacity development as a positive for supply chain stability. Bailly also confirmed that the company is not seeing excess customer inventory and that previous destocking headwinds appear to be resolved.

Jaeson Schmidt of Lake Street Capital Markets asked for clarification on the modest growth outlook for the robotic surgery business, the company's market share at its largest customer, and whether there were any signs of excess inventory building among customers.

Answer

CEO Jeff Bailly clarified that the modest growth outlook for 2025 applies to both the largest customer and the robotic surgery segment as a whole. He stated that UFP holds approximately two-thirds of the business with its largest robotic surgery partner and described the relationship as highly collaborative. Bailly also confirmed that the company is not seeing any pockets of excess inventory and that previous destocking headwinds in other markets appear to have subsided.

Jaeson Schmidt inquired about the impact of macro dynamics on Q1 orders, demand drivers for the V-XR platform, and the terms of the new 3-year STEP agreements.

Answer

CEO John Givens stated that Q1 orders were likely driven by agencies spending budgeted funds before they were lost, rather than a macro pull-forward. He confirmed V-XR interest is fueled by de-escalation training grants and adjacent markets like private security. Regarding the STEP program, Givens described the move to 3-year contracts as a strategy to align with faster tech cycles, while CFO Alanna Boudreau added that the new terms provide more guaranteed recurring revenue by removing a previous 'easy out' for customers.

Jaeson Schmidt of Lake Street Capital Markets inquired about the expected duration of the challenging federal funding environment, VirTra's strategies to navigate this uncertainty, and the implications of the IVAS program's transition from Microsoft to Anduril.

Answer

CEO John Givens explained that while the funding environment may remain soft for another one to two quarters, he anticipates it will return stronger and more focused on VirTra's solutions. He detailed advocacy efforts in Washington D.C. to refine grant processes. Regarding the IVAS program, Givens described the transition to Anduril as 'incredibly positive,' citing Anduril's deep government contracting experience and the program's strong performance in recent tests.

Jaeson Schmidt of Lake Street Capital Markets inquired if strong Q1 results were due to pull-in orders, how gross margins might stabilize in Q2 given tariffs and price hikes, and whether BKR 9000 revenue grew sequentially.

Answer

CEO John Suzuki clarified that there were no pull-in orders; in fact, federal orders were delayed. He stated that Q2 gross margin is expected to remain above the 42% target, as anticipated tariffs from Mexico have not yet materialized, though some tariffs from Vietnam have. Suzuki also confirmed that revenue from the BKR 9000 device was up sequentially in Q1.

Jaeson Schmidt of Lake Street Capital Markets inquired about year-to-date order activity, potential lengthening of sales cycles, primary sources of interest for the BKR 9000 radio, and the timeline for the software solutions business to become a material contributor to the P&L.

Answer

CEO John Suzuki stated that Q1 order volume was in line with seasonal expectations, though some federal orders were delayed into Q2 due to the timing of budget approvals. He confirmed the strongest interest for the BKR 9000 comes from the state and local government market, driven by its multi-band capability and attractive price point. Regarding the software business, Suzuki explained that the company is still in the early stages and expects to provide more clarity on its long-term potential at the end of 2025.

Jaeson Schmidt of Lake Street Capital Markets inquired about the key factors that could push fiscal year results to the high or low end of guidance, the current state of the U.S. Tier 1 market, and the outlook for gross margins.

Answer

CEO Pete Smith stated that Aviat is comfortable with the full-year consensus and noted that potential order pull-ins to avoid tariffs could be a positive swing factor. He also commented that the U.S. Tier 1 capex cycle has likely bottomed, with a potential uptick in microwave demand lagging by a couple of quarters. CFO Michael Connaway added that Q3's strong gross margin was driven by M&A synergies and a favorable software mix, which he does not expect to persist at the same level in Q4, leading to a more conservative margin outlook.

Jaeson Schmidt from Lake Street Capital Markets inquired about the primary drivers behind the strong Q2 outperformance, sought clarity on fiscal 2025 expectations for the U.S. Tier 1 market, and asked about the current gross margins for the Pasolink business and their expected scaling.

Answer

CFO Michael Connaway highlighted that strong bookings from the Pasolink and 4RF businesses were key drivers, with the company's book-to-bill ratio at 1.08. CEO Pete Smith noted that a faster recovery in the U.S. Tier 1 market would be an upside to the current guidance. Connaway added that Pasolink's margins improved in Q2 and are expected to see further runway in the second half of the year as the manufacturing transfer completes.

Jaeson Schmidt of Lake Street Capital Markets inquired about the expected trajectory for gross margins following a soft Q1 and sought clarity on the confidence in the significant revenue ramp required to meet the revised full-year guidance.

Answer

CFO Michael Connaway explained that Q1 gross margin erosion was driven by an unfavorable mix shift away from the higher-margin Americas business and weaker software sales, both of which are expected to normalize. He projected a "nice step-up" in Q2 margins, with further improvement in the second half of the year. Connaway also noted that the order trajectory is strong, with a book-to-bill over 1 in Q1 and an even stronger start to Q2. CEO Pete Smith added that the company could achieve record bookings in the December quarter.

Jaeson Schmidt asked for the starting backlog figure for fiscal 2025, growth expectations for the newly acquired 4RF business, and the anticipated gross margin trend throughout the upcoming fiscal year.

Answer

CEO Pete Smith and CFO Michael Connaway confirmed the year-end backlog was approximately $290 million. Smith stated that the 4RF acquisition would see some growth but an immaterial earnings contribution in fiscal 2025. Connaway explained that while full-year gross margins will be dampened by mix changes, he expects margins to improve sequentially through fiscal 2025 from the Q1 low point.

Jaeson Schmidt asked for details on recent price increases implemented across the product portfolio in response to tariffs and requested an update on the progress of the relationship and sales rollout with distributor ADI.

Answer

President and CFO Kevin Buchel confirmed an 8.5% surcharge was implemented in April to cover tariff costs, which was received fairly by the market, and noted a typical annual price increase is also planned for July. CEO Richard Soloway described the relationship with ADI as progressing well, with good sell-through stats and valuable introductions to large dealers, reiterating the potential for ADI to become a 5% of total revenue customer.

Jaeson Schmidt from Lake Street Capital Markets inquired about the progress of the ADI distribution relationship and whether to expect normal seasonal patterns for equipment revenue in the upcoming June quarter.

Answer

President and CFO Kevin Buchel reported that the ADI relationship is progressing well, introducing NAPCO to new dealers like Securitas, and he expressed hope that ADI could become a 10% of equipment sales customer. Regarding seasonality, Buchel stated that historically, Q4 (the June quarter) is the company's strongest. Despite recent disruptions, he expects that pattern to hold, anticipating Q3 to be a comeback quarter and Q4 to be even stronger.

Jaeson Schmidt from Lake Street Capital Markets asked for an update on the relationship with the new distributor, ADI, and inquired about the expected timeline for the one remaining distributor to work through its excess inventory.

Answer

Kevin Buchel, President, COO & CFO, expressed high satisfaction with the ADI relationship after one year, highlighting that ADI has facilitated introductions to large dealers and could soon become a 10% hardware customer. Regarding the other distributor, he explained it is difficult to predict a precise timeline for inventory reduction as much of their business occurs late in the quarter, but the company is actively working on it.

Jaeson Schmidt asked about the timing of the Q1 order slowdown and when visibility for the second half deteriorated, particularly after the company's recent Analyst Day. He also inquired about the primary end markets that could act as swing factors for the full year and asked for the new quarterly revenue breakeven level following recent cost-cutting measures.

Answer

Executive Nick Grant explained that the slowdown in customer orders began mid-quarter, but the main variance was a $1.5 million shipment delay due to late-quarter engineering challenges. He identified the semi and auto/EV markets as the biggest potential swing factors, citing a healthy project pipeline. CFO Duncan Gilmour added that while cost-cutting is lowering the breakeven point from the previous ~$30 million level, the midpoint of Q2 guidance ($27M-$29M) is still slightly below breakeven.

Jaeson Schmidt of Lake Street Capital Markets inquired about recent order pushouts, asking if they were turning into cancellations. He also asked for the drivers behind the strong Q4 Life Sciences orders and what factors would enable the company to reach the high end of its annual guidance.

Answer

Executive Nick Grant confirmed that the company is seeing timing-related pushouts, not cancellations, and attributed the strong Life Sciences orders to broad-based demand for induction heating solutions. Executive Duncan Gilmour explained that reaching the high end of the guidance depends on the delivery of already-delayed backlog in the second half and a continued recovery in the back-end semi market.

Jaeson Schmidt of Lake Street Capital Markets inquired about the nature of order pushouts, the outlook for the front-end semiconductor market, and the sustainability of the quarter's strong gross margin performance.

Answer

Executive Nick Grant clarified that the $2 million in 'pushouts' were shipment delays from Q3 into Q4, and separately confirmed customer-requested delays in the front-end semi market, where a recovery is not expected until H2 2025. Executive Duncan Gilmour attributed the strong gross margin primarily to a favorable product mix with higher back-end semi sales, noting that cost-saving initiatives contributed about one percentage point to the improvement.

Jaeson Schmidt of Lake Street Capital Markets inquired about the linearity of orders during the quarter, the specificity of customer delivery pushouts, and the progress of the Alfamation integration.

Answer

Executive Nick Grant explained that order patterns were typical, with softness early in the quarter and strength at the end. He noted that most delivery pushouts were from Q2 into Q4 of the same year, not into 2025. Regarding the Alfamation integration, Grant confirmed it is progressing well but is not yet fully complete.

Jaeson Schmidt from Lake Street inquired about the sequential trend for bookings in Q1, the primary drivers for the expected second-half rebound in the Medical sector, and the company's tax rate outlook for the rest of the year.

Answer

CEO Jeff Benck reported that Q1 bookings were up year-over-year but flattish sequentially, as some larger deals were delayed due to tariff uncertainty. He stated the anticipated Medical rebound is driven by both the normalization of channel inventories and new competitive program wins. CFO Bryan Schumaker indicated the full-year tax rate is expected to be around 24%, dropping slightly in the second half from the Q2 guidance range of 24-26%.

Jaeson Schmidt asked for specifics on which end markets within the Medical segment are seeing strong bookings. He also questioned whether the segment's weakness was due to market share loss or inventory digestion and inquired about the potential for further gross margin expansion from Q4's record levels.

Answer

CEO Jeff Benck identified life sciences, particularly DNA sequencing systems, and medical devices like fluid management and monitoring solutions as areas with strong new bookings. He expressed confidence that the segment's underperformance is due to industry-wide inventory rebalancing, not market share loss, and expects a recovery in the second half of the year. CFO Bryan Schumaker noted that future gross margin depends on mix and operational execution, while Benck added that the company is also focused on leveraging growth to expand operating margins.

Jaeson Schmidt of Lake Street Capital Markets asked about which market sectors Benchmark is more optimistic about, the rationality of the current pricing environment, and the potential for operating margin upside when demand recovers.

Answer

CEO Jeff Benck expressed increased optimism for the Semi-cap sector's recovery and the continued strength in Aerospace & Defense. He confirmed the pricing environment remains rational, with Benchmark differentiating through complex, engineering-led solutions. VP of Finance Arvind Kamal projected a potential 25-50 basis point operating margin improvement from a full semi-cap recovery, while Jeff Benck added that overall revenue growth leverage would provide further upside.

Asked about the significant revenue decline in Latin America and its future outlook, and also inquired about any remaining supply chain issues.

Answer

Management explained that the decline in Latin America was due to the lumpy nature of large projects in the region. While they will still pursue opportunities there, the primary focus remains on the USA and EMEA. They also confirmed that the supply chain has normalized and there are no significant remaining constraints.

Jaeson Schmidt from Lake Street Capital Markets asked if the channel inventory headwinds are fully resolved and inquired about the potential margin impact of the new integrated chip-and-antenna technology.

Answer

CFO Jeff Hochstadt clarified that while channel inventory levels are improving, the issue is not completely resolved, but CPI Card Group is winning business in a strong market. CEO John Lowe added that the new 'all-in-one' chip technology is in early stages with long adoption cycles, making it premature to quantify the financial impact, but noted CPI is positioned as an early adopter.

Jaeson Schmidt from Lake Street inquired about any supply chain constraints, the current inventory levels of legacy products at carriers, and whether the new $10 million pre-order for next-gen feature phones consists of a single or multiple SKUs.

Answer

CFO Bob Tirva and CEO Tom Wilkinson responded that supply challenges are limited to end-of-life components for legacy products and that they can meet all demand for new products. Bob Tirva noted that carrier inventory of legacy products is generally low, with some remaining at AT&T. He also clarified that the $10 million order is for two SKUs—a camera and a non-camera version of a feature phone—for a single carrier.

Jaeson Schmidt inquired about Sonim's visibility into carrier inventory levels for Q4, the impetus behind the new scanner products, and whether the 30% gross margin is sustainable.

Answer

CEO Tom Wilkinson stated that Sonim has significant visibility and expects carriers to minimize year-end inventory. He explained the new scanner products are a natural portfolio extension and also address an identified market need, with the initial focus being on hardware sales. CFO Bob Tirva clarified that while gross margins were strong, calling the 30% level a 'new norm' would be premature as it was partly due to lower-than-forecasted carrier rebates, which are difficult to predict.

Jaeson Schmidt of Lake Street Capital Markets inquired about the extent of any Q3 order pull-ins to Q2, potential impacts from component shortages, and the sustainability of the gross margin in the low-to-mid 20s range given the product mix.

Answer

CEO Tom Wilkinson confirmed there were no significant efforts to pull revenue into Q2 and that the company's control over its supply chain prevented any impact from component shortages. CFO Bob Tirva added that future gross margins will depend on product mix, as the higher-volume XP3 feature phone has a lower margin than the XP8 smartphone. However, he affirmed that the Q2 margin level is a fair floor to consider going forward.